2 ex-brokers accused of fraud scheme

September 04, 2008

A former Wall Street broker pleaded not guilty Wednesday to charges he and a colleague duped investors into purchasing more than $1 billion in high-risk securities by making it look as though the trades were protected by the federal government.

An indictment unsealed in federal court in Brooklyn alleged Eric Butler and Julian Tzolov stood to pocket higher commissions because the securities were tied to subprime mortgages. The scheme was exposed when the subprime market collapsed.

Butler, 36, was released on $2.5 million bond following his arraignment on securities fraud, wire fraud and conspiracy charges. The Bulgarian-born Tzolov, 35, was out of the country but expected to return and surrender on the same charges. If convicted, each faces up to 20 years in prison and a $5 million fine.

Credit Suisse said the two resigned in September 2007 "after we detected their prohibited activity and promptly suspended them."